1. Outcome Based Contracting
New Approach to Community Infrastructure Improvements
David Palmer, PMP
Energy Performance Contracting Specialist
Schneider Electric Energy & Sustainability Services
This is an example of a Title Slide. We need to convey Life Is On in everything we do, so try to lead with compelling images that are vibrant, authentic, and human. The human element should be apparent and within the context of a segment that we touch.
To keep this PowerPoint template file size reduced, we included a small library of image choices in the Slide Master (under View). You can also get them from the SE Asset Library:

2. More than 180 Years of History
Est. 1836
So, how can Schneider Electric understand your challenges? First of all, I want to give you a brief overview of our heritage.
Despite the Germanic sound our name, we are a French company, created in 1836 at Le Creusot, a small town in Burgundy.
We started out as canon-makers, before going into other areas of the steel industry.
In the second part of the 20th century, we entered into what would eventually become the historical business of Schneider Electric : Power & Control, first and foremost by acquiring Merlin Gerin and Telemecanique in France, followed by Square D and Modicon in the US. Thanks to those acquisitions, we also became an international company. (For instance, we have been in India since 1963 and in China since 1988.)
At the end of nineties, as a symbol of our shift in focus towards Power & Control, Groupe Schneider was renamed Schneider Electric.
In 2001, we embarked on a wave of targeted acquisitions to again refocus our business from Power & Control to Energy Management. We acquired MGE in Secured Power as well as APC in order to become a leader in Critical Power and Cooling (2007). We then proceeded to acquire TAC in the sector of Building Management in 2003 and Pelco in 2008, thus becoming a top player in building automation and security, Power measurement for power and monitoring systems (a crucial element in energy efficiency).
Last but not least, we acquired Xantrex, a leader in connectivity and reliability systems for renewable energies.
To sum up, the company has been transformed since We extended our business portfolio as well as doublin our sales and our number of people.
Our dynamic history explains who we are today: the global specialist in energy management

3. Energy Management and Automation
Schneider Electric, leading the digital transformation of
Energy Management and Automation
$28.1 billion FY 2017 revenues
~5%
of FY revenues devoted to R&D
142,000+
people in 100+ countries
Our Products & Solutions – FY 2017 revenues
Balanced geographies – FY 2017 revenues
27%
North America
18%
Rest of World
Western Europe
28%
Asia Pacific
Medium Voltage
Low Voltage
Secure Power
Industrial Automation
COMMITTED TO ACCESS TO SAFE,
RELIABLE AND AFFORDABLE ELECTRICITY FOR ALL MANKIND
We are a ~€24.7 Billion, with 144,000 people in over 100 countries
We invest about 5% of our revenues into R&D annually
We have 4 diversified end markets – Non-residential & Residential Buildings, Data Centers and Networks, Industrial and Machines, Utilities and Infrastructure.
Our business is well balanced across geographies – 28% of our revenues come from North America; 27% from Western Europe; 27% from Asia Pacific; and 18% from Rest of the World.

4. Summary
What I am talking about today
A new means to fund needed energy-related improvements in remote communities
I think there’s an opportunity to apply a proven process in a new way to the benefit of remote Alaskans
This process provides upgraded/new infrastructure and components, reduce energy costs, and improve quality of life in many cases
Not just about energy. Focus is how energy-related systems NEED TO WORK to best serve their purpose, then about how to do so efficiently
The net cost to the community, as a whole, should be close to ZERO
This is an example of a Text Slide. Reference the different layout options in the Slide Master (under the View tab) for different variations. Remember, our new Brand Guidelines call for clean and simple messages and design. Reference the PowerPoint Guidelines on the Brand Book for tips and useful information on creating effective presentations.

5. Anti-Summary Effective selection of energy-related improvements
What I am NOT talking about today
Effective selection of energy-related improvements
(but it should be holistic and involve all stakeholders so the RIGHT goals are actually achieved!!)
The energy efficiency and renewable energy technology available today
Agencies’ programs for grants, loans, and assistance
Sales pitch about myself and my company
A “one size fits all” concept – value of this idea depends on the individual community’s situation
This is an example of a Text Slide. Reference the different layout options in the Slide Master (under the View tab) for different variations. Remember, our new Brand Guidelines call for clean and simple messages and design. Reference the PowerPoint Guidelines on the Brand Book for tips and useful information on creating effective presentations.

6. Leveraging Future Savings With Financing
Anchorage-Kenai (110mi) 2x/week: 1,760mi per month
Current Vehicle: Ford F250
Mileage/Gallon:
Fuel cost/Gallon: $4
Monthly Fuel Cost: $704
Alternate Vehicle: Subaru Outback
Mileage/Gallon:
Total Monthly Fuel Cost: $271
Monthly Loan Payment: $400
Total Monthly Cost: $671
Monthly Savings: $33

7. Leveraging Energy Savings
Energy Performance Contracting
Accesses third party (private) funding for facility and infrastructure energy savings
Enables financing of capital projects, repaid from energy and operational savings created by improvements
Allow improvements within existing budgets
Savings tracked and SECURED by contractor
Before Project
After Project
Energy
Savings (Payment)
Energy
Operations & Maintenance
Operations & Maintenance
Annual Cost
Annual Cost
This is an example of a Text Slide. Reference the different layout options in the Slide Master (under the View tab) for different variations. Remember, our new Brand Guidelines call for clean and simple messages and design. Reference the PowerPoint Guidelines on the Brand Book for tips and useful information on creating effective presentations.

8. Energy Performance Contracting
Non-financial benefits
Rehabilitate public/community infrastructure
Upgrades improve reliability, safety, operating costs
Removes the need for capital funds to do those same upgrades
Gain a long-term partner for performance
Contractor designs project around long-term performance goals (which aren’t all energy!)
Both energy savings and function of project are tracked long-term
Consider energy from sources to loads as a complete system
Provides better function and performance than isolated efforts
High-need, relatively-low-savings scope of work is offset by scope with greater proportional savings

9. Outcome Based: Will It Work Well Long Term?
Contract
Years 5 10 15 20
Performance Period
Commissioning
Construction
Final Design
Development & Design
Facility & System Audit

10. Key Players (Historically)
Who all is involved and what do they do?
Energy Services Company (aka ESCO)
Prime contractor
Responsible for analysis, design, construction, startup, training, and monitoring savings
Entity / Building Owner
Public sector entity
Directs financial criteria, required scope of work, preferences
May have multiple sites but is typically one legal entity
Financier
Utility
Approval of scope affecting their system
Rebates or support programs
All of the components make something great!

11. Entity / Building Owner
Money and Responsibility Mechanics
How’s it all work?
Utilities
Entity / Building Owner
Utility
Old Bill
Bill
New Bill
Performance
Guarantee
Savings
Performance
Guarantee
Turnkey Project
ESCO
Lender
Financing

12. So, you say this has been done before?
Why yes, yes it has…
Primarily by public/government entities
Their funding is stable
They typically stay in their buildings a long time
Long payback (15yr+) is comfortable, allowing for comprehensive projects
Contracting concept developed in 1980s
US DOE created federal program in 1990s
Thousands of projects
Billions of dollars
Lots of light bulbs

13. Piece together the right scope, piece together the right funding
Natural opportunity to arrange multiple funding sources
Projects are compiled, guided by entity’s goals and needs, then bundled into a package that is attractive financially
Funding can be compiled in a similar fashion – identify the sources available (beyond third-party financing), evaluate and construct a package comfortable for the entity
Project outcomes are known (and secured by the contractor) prior to any construction – allows funding entities security of what will actually happen
Historically, these projects combine financing, entity funds, utility rebates, tax credits and grants

14. Rural Alaska Energy Projects
Current State: Oversimplified
Most entities seek and pursue upgrade projects on their own; not combined with other agencies
Professional assistance is cost prohibitive vs size of potential benefits
Financing amounts are too small for most commercial lenders
Construction costs are too high to make sense (due to cost of remote work by specialist contractors)
Each project is on its own journey through potential funding sources (grants, loans, etc.), which takes a lot of time and effort

15. Big Idea - Combine Multiple Community Entities Into One Project
Ta Da!

16. Yes, it’s worth it!! The “Whole Village” approach
Let’s be honest, it’s going to be hard at times. Is it worth it?
Economies of scale for: engineering, construction, project and O&M support
More substance to the involvement required of the players (i.e. not tiny projects)
Biggest deal: Access to MONEY
Aggregate federal, state and pseudo-governmental funding programs
Attract private sector investment due to adequate project volume
Tax incentives (New Market Tax Credit, EPACT and others)
A large enough impact for non-profit/foundation support
Yes, it’s worth it!!

17. Questions / Matters to be Resolved
And this isn’t all of them…
Do rural communities even like the idea (specifically, borrowing money to perform energy upgrades)? What if it’s the only way they can afford the improvements they need? How do the various parties engage and at what level does it become “one project”? Who is the entity that contractually combines the individual owners’ projects? Who commits to repay financing if one of the building owners defaults? Unlikely, but financiers care A LOT
What communities want to be pilot sites? How will the very first site be decided? How much should be bitten off in terms of complexity – scope, funding programs, etc? What aren’t we thinking of? What agency/organization support and funding programs should be involved? When should they engage? Do YOU want to get involved? Speak up!
Section title with image slide

18. CONCLUSION: Many people from various entities and agencies think this idea has enormous potential. Now we need to make it happen!
Confidential Property of Schneider Electric |

19. David Palmer david.palmer@schneider-electric.com 360-823-3040
Thank you!
David Palmer